8 Questions to Ask From Angel Investors Before Raising Funds

Here’s how a businessman can get perfect mentoring as well as angel investment for a venture
  • BY Jaspreet Kaur

    Feature Writer, BusinessEx

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  • Jan 31,2020
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  • 17 Mins Read

To push off a startup from the ideation stage, an entrepreneur needs a large amount of pre-planning. The initial journey of a startup from the blueprint to first paying customers is much similar to the process of growing a tree. The way one needs to regularly water a seed after sowing it and also, supply an adequate amount of sunlight for preparing its food. In the same course, a company needs to be overseen on a regular basis. After establishing the firm and securing one or two paying customers, the entrepreneur achieves a big milestone. Following this, the next part of the journey starts--business expansion. 

For extending business across the city or nation, a businessman requires mentoring as well as angel investment. Both these core elements are basically crucial to build a profitable business. While a businessman approaches an angel investor or an angel group, there is a long check-list that he needs to follow to secure investment. 

Besides try securing an angel funding, there are a few things that the entrepreneur should know about an angel group. To comprehend the fund size, core investment sectors, and other additional information, an entrepreneur needs to ask eight important questions from the angel investor or angel group.

What is the Current Status of the Angel Fund?

Before seeking funding, an entrepreneur, firstly, needs to ascertain the backdrop of an angel group. He should ask the amount of money the angel investors invest wholly. Further, he needs to inquire about the size of bets that the angel group makes in a company generally. After garnering the responses, he should know if the angel investors do further capital infusions after the initial investment.     

Do You Make Bets on Certain Industries or Geographies?

The angel group presently concentrate on surging industries and further, businesses operating in those sectors. At the same time, angel investors also infuse money in diverse businesses. Keeping this in mind, the businessman should ascertain the sectors that entice angel groups and should gather information if the investors gain interest in the companies beyond their targeted spectrum. 

What are Successful Bets of the Angel Group?

The entrepreneur should ask this question when he gets into a conversation with the angel investors. It is essentially a follow-up question and helps know the experience of the angel group. 

Through this, the entrepreneur can know which organizations the angel investors have funded in a large amount.   

What Things Do Angel Investors Consider While Making an Investment? 

Raising funds for a company is a slow and steady process; it takes almost six months to garner the required sum. To qualify the pre-screening round, a businessman should have a clean backdrop, good track report and other relatable metrics. 

Prior to the fundraising, the businessman should prepare his company’s profile by finding out all metrics that the company needs to qualify to secure angel funds.  

Does Angel Group Lead the Investment Round? 

Ascertaining a lead investor is important in order to complete a startup’s fundraising round. In essence, a lead investor plays a pivotal role in the fundraising process as he decides valuation as well as conditions of the funding round. 

While searching for a lead investor, the entrepreneur need not overlook other additional investors for the funding process. 

Does Angel Group Co-invest? If Yes, Then Who?

This is a follow-up question that the entrepreneur should ask an angel investor to understand the nature of the investment. For comprehending the investment round, the entrepreneur should determine whether the angel group has additional partners with whom they co-invest. If he receives a positive answer and gets their deets then he gets an estimated idea as to who he needs to contact next. Furthermore, he can influence those investors to participate in the funding round.

 What are Standard Terms of the Angel Investment Group? 

Sometimes, the terms of the business deal hold more importance than the valuation. For first-time entrepreneurs, it is vital to comprehend the common deal terms of the funding round. He can understand them by connecting with a counsel. After collecting information about deal terms, he has to inquire what type of deal terms the angel investment group follows. If the group does not keep any deal terms in the investment then the company and its founders can become liable to losses in adverse scenarios.

Do Angel Investors Take a Board Seat in the Invested Company?

This is one of the important things to know if the angel investor takes a board seat in the company or not. Further, the businessman should inquire if the investor has expertise in a specific industry and if their connections can help in any way.  

By keeping an investor in the funding round aids in keeping a check on the company. On the other hand, the decision-making process will also influence due to the presence of the angel investor in the board of directors.  

The above-listed questions are vital questions to ask an angel investor or angel investment institution. To know more about angel groups or connect with them, register on BusinessEx, which addresses all business-related problems. The company renders authentic buyers to sellers of the business and also, help gain traction of the leading angel investors of the industry.

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